PM Albanese’s break barely raises an eyebrow but sensible interest rises are causing hysteria

Anthony Albanese already feels he needs a break but where’s the outrage? Meanwhile the RBA is lifting the cash rate from near zero and commentators are hysterical.

What’s more extraordinary?

The hysteria over really quite modest – and way overdue – interest rate rises from the Reserve Bank, along with the supposed “plunges” in property prices they’ve caused?

Or the Prime Minister declaring “job done” after less than three months in office and heading off on a holiday, without a peep from the massed ranks of the media who were all outraged when his predecessor declared he “didn’t hold a hose”?

TV and radio bulletins and newspaper front pages have almost literally screeched about the fastest rate rises in 30 years or more, seemingly completely oblivious about two rather basic things.

One, the RBA has never started raising rates from zero before because it had never been down to zero before.

Prime Minister Anthony Albanese at Parliament House in Canberra. Picture: Gary Ramage

And two, inflation is 6 per cent, heading for at least 8 per cent. It’s less a case of the RBA raising its rate and much more the reality of the RBA moving from a big negative real interest rate to a slightly less negative one.

Both its official rate, now 1.85 per cent, and home loan rates of 4-5 per cent are still hugely advantageous to borrowers.

And the piddling rates being paid to depositors are now ripping them off even more in real terms than when they were getting zero interest. At least back then, inflation was only stealing 2 per cent of their money each year.

The commentary from so-called experts about housing prices has been even more abysmal. It’s essentially been based on two assumptions, albeit completely unknowingly by those supposed experts.

One, that once the RBA cut its official rate to all but zero, it was then obliged to leave it there, essentially forever.

Home loan borrowers had been given access to essentially “free” money. If you can borrow $500,000 and face an interest bill of just $10,000 a year when inflation is 2 per cent a year, you are getting free money.

And so two: that the values of the houses bought with that “free” money should never go down – just keep going up.

Property prices were always going to fall when the RBA started raising its rate, and banks would follow through with increases in their home loan rates.

Just as they rose so dramatically when rates were going down and even more pointedly staying down, and staying down at completely unrealistically low levels, for years.

It’s not just the last two years, when the RBA first cut its official rate to 0.25 per cent and then followed through to 0.1 per cent; it’s the years before that when it had already cut to 1.5 per cent and then 0.75 per cent.

It’s a long and complicated story. It had to cut because of what the Fed in the US was doing. But it did supercharge our seemingly unending property boom.

Reserve Bank governor Philip Lowe takes his own, more modest break. Picture: Jeremy Piper

So now prices have fallen by maybe 5 per cent, the falls might go to 10 per cent and maybe even 20 per cent worst case.

But that comes after rises of at least 100 per cent in the past decade.

Think about it. Someone who bought, or indeed already owned a property worth $500k in, say, 2012 saw it go to $1m or more. Now it’s dropped to $950,000 and may go to $900k or even $800k.

Worst case, they would still be ahead $300k.

It’s those who have bought in the past few years that are going to suffer actual – but arguably only temporary – losses.

But it’s only about 20 per cent of them that will really be behind – the first home buyers.

The other 80 per cent of recent buyers are people who had sold a property and cashed in huge mostly tax-free gains, and traded up into a new property. Their gains would far exceed any loss so far on the new property.

As for our Prime Minister, the election was just 11 weeks ago. He immediately jumped on a plane and was barely off one for the next seven weeks.

It’s only in the past four weeks or so that he’s actually been at his desk in Parliament House at which the proverbial buck is supposed to stop. And now he’s off on a “well deserved break”.

What has he and his government actually done to address some of the concerns and the financial pain of 26 million Australians?

You know, petrol prices, gas and electricity prices, access to health care, food prices, and so on?

The two big – indeed only – things he’s done are legislating the 43 per cent emissions cut target and preparing the legislation for the Aboriginal “Voice”.

Both of which will do four-fifths of five-eighths of copulating all to address the today concerns and pain of Australians, Indigenous and non-Indigenous alike.

Yes, he really deserves his holiday; maybe he should extend it to a year or two.

Originally published as PM Albanese’s break barely raises an eyebrow but sensible interest rises are causing hysteria